Partnerships: Microfinance Institutions and Commercial Partners

This microinsurance note describes the opportunities and challenges of partnerships between commercial insurers and MFIs. The note points out that MFIs, which work directly with the low-income market, can be perfect intermediaries for insurers to reach the low-income market. The note addresses the issues in structuring partnerships. Parties identify the roles they will play in the microinsurance process in:

• Underwriting;
• Staff training;
• Premium collection, remittance;
• Claims processing.

The document further lists the challenges for MFI partnerships with insurers:

• Expectations for cross-selling efficiencies have not been realized in many institutions;
• The expectation, that microinsurance could be merged into an MFI with essentially no additional cost, has proved overly optimistic;
• The assumption that MFI staff will actively cross-sell insurance has generally not been confirmed.

The note also elaborates on keys to success with MFIs as microinsurance agents:

• Products are directly related to the products of the agent institution;
• The MFI has sufficient knowledge and motivation to actually represent its clients in negotiations with insurers, and manage the product development process;
• The MFI recognizes the benefit of insurance;
• Products are simple in all respects;
• The products are valued by the MFI's clients, and are mandatory;
• Premiums are fair for all concerned;
• The agent's field staff are sufficiently skilled and actually take the time to explain insurance and the product clients are buying;
• The insurer develops a different business model for the low-income market from that for its traditional clientele.

Finally, the note concludes that the model has significant potential in expanding microinsurance access to millions of low-income families. It is still early in its evolution, and progress is being made based on lessons learned.